Related Links |
||||||||
|
||||||||
|
(Complete gift description)
A charitable lead trust holds your gift of appreciating assets, pays income to the Guggenheim for a period of years, and then returns the remaining principal to you or transfers it your designated beneficiaries. A charitable lead trust can provide significant estate and financial planning benefits.
A grantor charitable lead trust may offer some income tax benefits, and allows you to maintain some control over the principal, including the right to have the pricipal balance returned to you when it terminates. Grantor charitable lead trusts are discussed below.
Many donors use this gift plan to pass assets to their children or other heirs, using a non-grantor charitable lead trust. Non-grantor charitable lead trusts offer charitable deductions for transfer tax purposes, but not for income tax purposes.
Will your children face a tax burden when you die?
The non-grantor charitable lead trust reduces the cost of passing property to your heirs in two ways. First, the estate- and gift-tax value of assets you place in your charitable lead trust will be reduced by the present value of the income that the trust will pay to the Guggenheim. The longer the charitable lead trust pays the Guggenheim income, and the more income it pays, the larger your estate and gift tax deduction will be.
Second, the taxable value of the charitable lead trust assets is fixed as of the time you establish the trust—any subsequent increase in the value of the assets will pass to your heirs outside your estate and thus free of estate and gift tax.
This combined reduction in the taxable value of the charitable lead trust assets means that your family can often receive more from an estate plan containing a non-grantor charitable lead trust than they could from an outright bequest from you.
The non-grantor charitable lead trust also offers you these additional features:
- It can be funded with shares in a growing family business, thus lowering the cost of passing ownership on to the next generation.
- The income earned by a non-grantor charitable lead trust while it is in operation is not taxable to you.
- The trust can run for a term of years or the lifetime of an individual.
- The charitable lead trust's upfront income stream delivers immediate benefits to the Guggenheim.
Are you concerned about high income-tax liability?
You may be in a high earnings period where re-directing income to charity makes sense. Alternately, this may be a very high tax year; you want a deduction but don't want to part permanently with a valuable asset.
Examine a grantor charitable lead trust. This creative plan will hold your gift of appreciating assets, pay income to the Guggenheim for a period, then may return the assets to you. You will receive an upfront income tax charitable deduction for creating the grantor charitable lead trust—the present value of the total income payments to the Guggenheim (you receive no income tax deduction when you establish a non-grantor charitable lead trust).
The trust's annual earnings (minus the distributions to the Guggenheim) will be taxable to you. However, if the amount of our income and the length of time we receive it are adjusted sufficiently, the upfront deduction can offset this subsequent tax.
At the end of the grantor charitable lead trust's term, the assets return to you or the beneficiary you designated.
How is the amount paid to the Guggenheim determined?
A charitable lead trust can pay us a fixed amount of income every year (a charitable lead annuity trust), or pay us a fixed percentage of the value of trust principal, as revalued annually (a charitable lead unitrust).
The choice of format will have some effect on your tax savings. We can help you and your advisors model the different options as you consider your gift plan.
How do I create a charitable lead trust?
Setting up a charitable lead trust is not particularly difficult, but you should be advised by an attorney or other advisor with expertise in the area of charitable trusts and estate planning. We can provide income and tax projections for your gift and an initial draft of the charitable lead trust agreement for review by you and your advisors.
Once the final agreement is signed, you can fund your charitable lead trust by transferring assets to your trustee.
For more information
E-mail us, complete the personal illustration form, or call us at 212 423 3500 so that we can assist you through every step of the process.